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The Port Mackenzie Money Pit It’S Time for Answers, Not Investment

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The Port Mackenzie Money Pit It’S Time for Answers, Not Investment The Port MacKenzie Money Pit It’s time for answers, not investment. The Port MacKenzie Money Pit The Port MacKenzie project is the latest in a long line of extremely expensive projects undertaken by the Mat‐ Su Borough that have turned into complete financial boondoggles. Growth is something all Alaskans believe in. But pouring money into a bottomless pit is not. The Mat‐Su Borough has a long track record of mismanaging projects funded with public dollars. From the $7.8 million ferry with nowhere to dock to the fancy $4.5 million Ferry Terminal that sits empty and the empty $225 million Goose Creek Prison, Can Alaska continue the Point MacKenzie area in the Mat Su Borough is a magnet for to afford the Mat‐Su bad investments and mismanaged projects. Let’s not let another Borough’s poorly money pit swallow Alaska’s public funds. planned projects? The Port MacKenzie project has never received much support from the general public. Investment in Port MacKenzie was first rejected by the voters of the Mat‐Su Borough in 1989 when they voted down a $25 million bond package. Opposition to this project has remained strong over the years, local meetings frequently draw large crowds of vocal opponents who cite the Mat‐Su Borough’s history of mismanagement and the anticipated runaway costs of the project among their primary concerns. After the bond package was rejected by voters the Borough commissioned a study that the described the Port as “a speculative investment whose long‐term development potential is uncertain.” Despite the findings of their own study commissioned by Temple, Baker and Sloan, the Mat‐Su Borough moved forward with the project anyway and used a loan on a Borough‐owned office building to finance construction of the Port. The Port opened in 2000 but has seen only about a dozen boats at its dock since opening and has been plagued with mismanagement and misinformation from the beginning. The Port has run huge structural deficits frequently losing millions of dollars every year. Now, the Mat‐Su Borough wants to dump another $170 million of Alaska’s public dollars to construct a rail spur to the Port. The Borough continues to push this development despite the history of failure at Port MacKenzie and without adequate information on the economic viability of the Port or its impacts on Alaska’s existing ports in Anchorage and Seward. Page 2 of 15 Port MacKenzie – A Speculative Investment From Day One The Port MacKenzie project was not projected to make much money, even under the Mat‐Su Borough’s own projections. Unfortunately time has shown those grim financial projections becoming a reality. While the Mat Su Borough tried to suppress the findings of the Temple, Baker & Sloan report, the underlying assumptions were clear: this is a risky investment at best. According to this original report, even under the rosiest assumptions, the port would lose tens of millions of dollars for years. After that, it would In November 1989, the start to earn money, bringing in a total of $48 million over the next Anchorage Daily News reported: decade. That’s if everything breaks in the borough’s way: the Mat Su Borough’s Boston based proposed Wishbone Hill mine near Palmer goes into production and consulting firm Temple, Baker & ships through Mackenzie, Healy coal now shipped through Seward is Sloane, Inc. describes the Point switched, and an export industry in Mat‐Su logs and wood chips Mackenzie Port Project as “ a speculative investment whose springs to life. None of these assumptions can be safely made even long term development 15 years later. potential is uncertain” and suggests the borough “carefully Under the most pessimistic assumptions the consultants examined, the consider the full range of port would run in the red every year for the first the first decade, alternative economic options losing $70 million. After that, it would make money for two years a available.” total of about $17 million then shut down as Wishbone played out. The report also notes that two thirds of the economic benefits in the port analysis could come to pass even without a port. 1 To date the Port has run major deficits and not ever come close to turning a profit. The Mat‐Su Borough is now asking the State of Alaska to put good money into supporting their bad investment. Can the Mat‐Su Borough prove that they will finally be able to make a profit if the rail spur is completed? History tells us that profits at Port MacKenzie are unlikely. What Will It Cost to Operate and Maintain Port MacKenzie? The Port of Anchorage is a world class Alaskan deep‐water port capable of safely and efficiently transporting people and commodities. Only 1.5 miles separate the two ports. Railroad service to Port MacKenzie will save only 35 miles.2 Major questions remain about the operating and maintenance costs of the Port MacKenzie rail extension. It is likely that any savings because of distance would be offset by the operations and maintenance costs of tracks, 1 Anchorage Daily News, November 17, 1989, Report Pans Mat Su port, but boosters vow to press on by Stan Jones 2 Benefit‐Cost Assessment of the Port MacKenzie Rail Extension, page 6 Page 3 of 15 installing new signals, and substantial infrastructure required to offload bulk commodities like coal over the steep slopes of the bluff between the rail loop and the dock. Unlike Seward, which offloads coal and loads coal on‐grade to a conveyor system to load dry bulk cargo ships, Port MacKenzie’s challenging geography will require conveyors built to accommodate the steep slopes. The existing conveyor system belongs to a private contractor who is in ongoing litigation with the Borough regarding use of this system. Accurate costs for installing a conveyor and dust mitigation system have not been obtained or described. Even the established infrastructure in the Port of Seward is under scrutiny by local residents, the state DEC and the EPA because of the visual evidence of coal dust release. With its proximity to farmland and dense population centers in Government Hill in Anchorage, the need for modern coal dust mitigation system (like bag houses and enclosed conveyors) cannot be overlooked. These costs have not been properly accounted for and will make it extremely difficult for Port MacKenzie to turn a profit. Proposed rail loop 2200 ft away (.4 miles) and over a 150 ft bluff from the dock and Port facilities. Overcoming these obstacles will cut into profits at the Port. Page 4 of 15 Tides and Ice: A Dangerous and Risky Combination for Shippers Anchorage is a sheltered port that offers safety to moored ship from Cook Inlet’s massive tides and winter ice flows, Port MacKenzie is exposed to both elements making accessing and mooring at the Port a very risky action for ships in the winter months. Port MacKenzie’s master plan states “Once a ship has been docked in waters such as Cook Inlet, with its ice and fast currents, pilots require almost perfect dock alignment in order to hold ships in the moored position.” 3 Per Marc Van Dongen, the Port Director at Port MacKenzie “The hardest part, most critical, is moving it while it’s at dock. The ship will have to be moved 5 times in the course of loading its cargo. We have a heavy current there, we will use 24 lines to tie the vessel to the dock. There’s a lot of force between the current and the ice.4 In February 2005 the first ship to dock at Port MacKenzie had to leave because of dangerous ice conditions while at the same time the port of Anchorage encountered no ice problems.5 In the draft EIS for the proposed Port MacKenzie rail extension, Appendix H, Biological Assessment, Section H.1, page H‐12, paragraph 1 states: “Port MacKenzie facilities include a deep‐draft dock that can be The first ship to ever dock used on a year round basis. In winter months with heavy ice, additional at Port MacKenzie had to tie‐down lines and a stand‐by barge are used when ships are broken leave early due to from their moorings by ice movements.” Because of the heavy ice and dangerous ice conditions. likelihood of ships being broken from their moorings, using Port Strong tides and heavy ice MacKenzie in winter months is inherently dangerous. For any shipper flow make Port to have to plan for this level of emergency back up just to stay tied to a MacKenzie a dangerous dock is a very expensive and risky undertaking. winter port. In February of 2005, the Alaska Journal of Commerce reported: A spokesman for a wood chip manufacturing firm said Feb. 7 his company is considering blocking out several weeks in mid‐winter as shipping dates in the wake of icy conditions at Port Mackenzie that prompted a ship to depart with half its cargo loaded. .. Several days after arrival, with three of six compartments loaded, the captain became alarmed at mounting ice conditions and decided to bring the vessel back to Homer to wait until conditions improved… Officials at the Port of Anchorage said ice conditions caused no delays at that port. “Port Mackenzie lies at a narrower point of Upper Cook Inlet than the Port of Anchorage, and is subject to faster currents, which contribute to ice problems in winter”, Van Dongen said… “Port Mackenzie was planned to operate year‐round, but everyone is aware of the ice... Van Dongen said ice conditions are a chance vessel captains take bringing ships into the area in the winter”.
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